Last Modified: Wednesday, June 12, 2013 5:23 PM
The fact that many Louisiana residents don’t understand financial affairs should come as no big surprise. The state’s poverty rate is 20.4 percent, only 21.1 percent of the population holds four-year college degrees and 32.3 percent of the population works in low-wage jobs.
The Financial Industry Regulatory Authority Investor Education Foundation reports state residents had the second-lowest financial literacy in the country. Only Mississippi scored lower, and it was named the least financially capable state. California, Massachusetts and New Jersey were listed as the most financially capable states.
Gerri Walsh, the foundation president, didn’t reveal any major surprises when she said there is a strong correlation between financial literacy and income and education. And that is why the foundation said its major purpose is to provide under-served Americans with the knowledge, skills and tools necessary for financial success throughout life.
Consider these other revealing statistics: Nearly two-thirds of Louisiana residents spend all they make or more. And 60 percent don’t have a rainy day fund to cover emergencies. Nearly 40 percent pay only the minimum due on their credit card bills.
Louisiana is inundated with payday loan companies because they find willing borrowers. Like other Americans, citizens in the state take out auto title loans, payday loans, get advances on their income tax refunds and use pawn shops or rent-to-own stores.
The IEF said non-bank borrowing methods often come with high interest rates, and attract individuals with poor credit histories. That is because they lack access to more traditional sources of credit.
State residents are not much different from their counterparts in other states. The IEF survey found that most Americans do not compare offers or collect information from more than one company when shopping for credit cards. Like the payday and other quick loans, not performing basic research when shopping for credit cards can also result in higher interest rates and higher borrowing costs.
The survey found that “making ends meet is a vital component of financial success. It said in Louisiana that 20 percent of individuals reported that over the past year their household spent more than their income (not including the purchase of a new home, car or other big investment), while 28 percent of individuals reported having medical bills that are past due.
Families and individuals that have rainy day funds are thinking ahead, the survey said.
“Those who lack a ‘rainy day’ fund, however, do not have money set aside to cover expenses for three months, in case of emergencies such as sickness, job loss or economic downturn,” the survey said.
It is obvious that many Louisiana residents don’t make enough money to save for a rainy day. The state’s per capita income in 2010 was $38,446, compared to the national average of $40,584.
One of the more telling statistics is that 14 percent of Louisiana residents ages 16 to 19 aren’t attending school and aren’t working.
A good education continues to be the ticket to a better life, but not much will change in the state until more citizens take advantage of the educational opportunities that are available.
This editorial was written by a member of the American Press Editorial Board. Its content reflects the collaborative opinion of the Board, whose members include Bobby Dower, Jim Beam, Crystal Stevenson and Donna Price.